China's gold miners explore lower-grade mines on price hikes

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Let's turn to commodities now, and the recent gold rush is starting to impact China's gold miners. Zhaoyuan city, in Shandong province, is known as the country's "Gold Capital" for its abundant gold deposits. Although global gold prices are soaring, gold mines there are not raising output as might be expected. Instead, they're exploring lower-grade mines to meet demand.

This is a small gold mine in Zhaoyuan city. Miners here explore around 120 tons of gold ore every day, and aim to produce some 350 kilograms of gold this year.

Production has been steady, even after the recent price hikes.

Lin Zuguang, gold mining engineer in Zhaoyuan City, Shandong Province said, "Our planned output is based on exploration in the mines and the grade of the ores. So far, we've met our monthly and quarterly targets, maybe even exceeded them by a little, but not much."

Other gold mines in Zhaoyuan, even the larger ones, seem to follow suit.

Hao Zengbao, director of Zhaoyuan Gold Industry Administration said, "This is a resource-oriented industry. Every gold mine has a limited service life time. Exploration is usually expanded year by year. It's not practical to rapidly raise output just because prices are going up."

But the increasingly expensive yellow metal is allowing miners to raise their costs, and exploit lower-grade ores. They say this helps with improving the sustainability of China's gold mines.

Hao said, "The average gold ore cutoff grade has been around 1.5 gram per tonne. Now, some mines have lowered the bar to 0.8 grams to 1 gram per tonne."

According to the China Gold Association, the country's gold production stood at 194.5 tonnes from January to July this year, a slight increase of 2.21 percent year-on-year. Industry insiders say the sustainable development of the industry is more important than short-term profitability.

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